WASHINGTON – Democrats took no time in faulting the Bush administration for causing the return to budget deficits predicted Wednesday by Office of Management and Budget Director Mitch Daniels.
Daniels, who is responsible for managing federal agencies' spending, told members of the National Press Club that the recession and the costs of war against terrorism have made annual federal deficits likely until 2005.
But Democrats said the real culprit was the 10-year, $1.35 trillion tax cut Bush pushed Congress into passing last spring despite complaints by many Democrats that it would jeopardize federal surpluses.
"I'd love to be able to say, 'I told you so,"' Senate Majority Leader Tom Daschle, S.D., told reporters. "I'd love to be able to say those four words and get full credit for the fact that we did. Because if you'll recall last spring we said, "Look, everybody, I know you think we've got all these surpluses out there, but they're based on projections that are no better than weather reports."
The Senate Budget Committee chairman, Sen. Kent Conrad, D-N.D., added that when Daniels blamed the recession and terrorism, "He left out the biggest cause -- the tax cut this administration pushed and got passed."
In his remarks Wednesday, Daniels defended the tax cut, calling it "a major reason why this recession, many are saying, may prove short and shallow."
Daniels's prediction was among the gloomiest assessments yet of the government's fiscal health. And it was the first time an administration official has publicly acknowledged that the government will return to deficit spending it had managed to stop in 1998.
He added that deficits could last longer than 2005.
"Things will have to break right for us to do that."
Daniels' comments further underlined what has been a turnaround in the government's budget picture of unprecedented abruptness.
The record $237 billion surplus of fiscal 2000 shrank to a $127 billion surplus in fiscal 2001, which ended on Oct. 1. Though Daniels provided no figures, private analysts and many congressional aides have long expected a 2002 deficit that will be well into the tens of billions of dollars.
Until several months ago, most forecasters were envisioning an ever-growing string of budget surpluses for the next decade, fading as the huge baby boom generation begins to retire. Last spring, official surplus projections for the coming decade totaled $5.6 trillion.
As recently as August, the Bush administration was predicting a 2002 surplus of $173 billion, down from its $231 billion forecast made in April.
But then the recession -- now officially pegged as having started last March -- took hold, and the condition of the government's books began to weaken. In addition, President Bush pushed a $1.35 trillion, 10-year tax cut through Congress, further eroding the projected black ink.
Another severe blow was dealt by the Sept. 11 terrorist attacks, which staggered the economy and triggered tens of billions in spending for anti-terrorism, the war in Afghanistan and economic recovery.
To try to force a return to surpluses, Daniels said the administration would propose a fiscal 2003 budget early next year that is generous toward defense, anti-terrorism and other high-priority programs, but seeks to trim other programs that seem less necessary.
He cited the National Science Foundation and food aid for women, infants and children as important and effective programs. He said the government has too many job-training programs and seemed to suggest that border protection programs could be made more efficient.
He also said the budget would propose taking some automatically paid benefits and changing their status so they must be approved annually by Congress or the money would not be spent.
Daniels provided no examples, but such a proposal would be likely to face tough going from lawmakers eager to protect constituencies who currently received such aid. Two-thirds of the $2 trillion annual federal budget -- including Social Security, Medicare, Medicaid, welfare, farm aid -- are currently for programs in which benefits are paid automatically, without annual congressional approval.
Daniels said the budget choices the administration and Congress make in the upcoming budget will be a test of whether they can "govern as adults should in a time of crisis and urgency." Those decisions, he said, will be crucial.
"The budget that we will be submitting just a couple months from now will determine whether we ever see another surplus," he said.
The Associated Press contributed to this report.
Get all the stories you need-to-know from the most powerful name in news delivered first thing every morning to your inbox